Wrap Text
Unaudited Condensed Consolidated Results for the six Months Ended 31 August 2013
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
UNAUDITED CONDENSED
CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2013
- Revenue R4,9 billion
- Operating profit R114 million
- Current order book R11,7 billion
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Restated Restated
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2013 2012 2013
Increase R'000 R'000 R'000
Revenue 2 4 864 363 4 792 277 9 057 386
Contract revenue 1 4 832 263 4 763 464 8 981 903
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) 1 195 386 193 285 424 259
Depreciation (77 584) (102 342) (195 029)
Amortisation of intangible assets (3 971) (3 736) (10 226)
Operating profit before investment
income and non-operational item
(operating profit) 113 831 87 207 219 004
Competition Commission penalty (323 000)
Operating profit/(loss) before
investment income 31 113 831 87 207 (103 996)
Investment income 17 614 17 317 36 892
Share of (losses)/profits from associate
companies and joint ventures (161) 2 621 17 223
Operating profit/(loss) before
finance costs 131 284 107 145 (49 881)
Finance costs (24 931) (30 364) (60 596)
Profit/(Loss) before taxation 106 353 76 781 (110 477)
Taxation (39 207) (25 692) (51 584)
Profit/(Loss) for the period 67 146 51 089 (162 061)
Other comprehensive income 90 942 21 644 57 010
Exchange differences on translation
of foreign operations (may be reclassified
to profit/(loss)) 90 942 21 644 57 010
Total comprehensive income/(loss)
for the period 158 088 72 733 (105 051)
Profit/(Loss) for the period attributable
as follows:
Equity holders of the company 31 67 146 51 089 (162 061)
Total comprehensive income/(loss)
attributable to:
Equity holders of the company 158 088 72 733 (105 051)
Earnings per share (cents) 38,47 29,45 (93,17)
Diluted earnings per share (cents) 35,70 27,16 (86,17)
Commentary to the statement of
comprehensive income
Headline earnings/(loss) reconciliation:
Profit/(Loss) after taxation attributable
to equity holders of the company 67 146 51 089 (162 061)
Adjusted for:
Profit on disposal of associate (296) (296)
Profit on disposal of plant and equipment (3 897) (5 125) (7 545)
Tax effect of adjustments 1 094 1 490 2 177
Headline earnings/(loss) 36 64 343 47 158 (167 725)
Normalised headline
earnings reconciliation:
Headline earnings/(loss) 64 343 47 158 (167 725)
Adjusted for:
Amortisation of intangibles 3 971 3 736 10 226
Tax effect of adjustments (1 109) (1 042) (2 856)
Competition Commission penalty 323 000
Normalised headline earnings 35 67 205 49 852 162 645
Number of weighted average
shares in issue 174 523 431 173 450 262 173 941 097
Number of diluted weighted
average shares in issue 188 080 746 188 080 746 188 080 746
Earnings/(Loss) per share (cents) 31 38,47 29,45 (93,17)
Diluted earnings/(loss) per share (cents) 31 35,70 27,16 (86,17)
Headline earnings/(loss) per share (cents) 36 36,87 27,19 (96,43)
Diluted headline earnings/(loss)
per share (cents) 36 34,21 25,07 (89,18)
Normalised headline earnings
per share (cents) 34 38,51 28,74 93,51
Diluted normalised headline earnings
per share (cents) 35 35,73 26,51 86,48
STATEMENT OF FINANCIAL POSITION
Unaudited Restated Restated
at at at
31 August 28 February 1 March
2013 2013 2012
R'000 R'000 R'000
ASSETS
Non-current assets 2 662 659 2 658 306 2 351 934
Property, plant and equipment 1 115 445 1 136 347 1 018 782
Investment property 70 511 60 794 57 673
Investment in associates 15 078 14 478 15 996
Investment in joint ventures 178 815 163 592 126 092
Goodwill and intangible assets 1 270 990 1 273 718 1 124 455
Deferred taxation 11 820 9 377 8 936
Current assets 3 908 526 3 427 547 3 462 896
Other current assets 2 916 864 2 573 190 2 603 283
Taxation 17 277 11 810 5 579
Cash and cash equivalents 974 385 842 547 854 034
Total assets 6 571 185 6 085 853 5 814 830
EQUITY AND LIABILITIES
Capital and reserves 2 155 296 1 996 308 2 113 696
Ordinary shareholders' interest 2 155 296 1 996 308 2 113 696
Non-current liabilities 524 806 664 059 281 770
Other financial liabilities Interest-bearing 417 497 574 415 213 073
Other financial liabilities Non-interest-bearing 12 833 3 784 7 493
Deferred tax liabilities 94 476 85 860 61 204
Current liabilities 3 891 083 3 425 486 3 419 364
Other current liabilities* 2 223 571 1 939 740 1 844 541
Provisions 1 604 909 1 431 910 1 496 106
Taxation 57 828 47 522 46 199
Bank overdrafts 4 775 6 314 32 518
Total equity and liabilities 6 571 185 6 085 853 5 814 830
* including interest-bearing liabilities of 358 186 360 951 146 737
STATEMENT OF CASH FLOWS
Unaudited Restated Restated
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Cash generated from operations 325 908 403 174 298 538
Interest received 17 614 17 254 36 829
Finance costs (24 931) (30 364) (60 596)
Dividends paid (20 973) (20 991)
Dividends received 10 560 1 015 2 167
Taxation paid (29 534) (33 722) (66 621)
Cash flows from operating activities 299 617 336 384 189 326
Expenditure to maintain operating capacity (4 625) (37 029) (67 824)
Expenditure for expansion (44 651) (359 518) (386 525)
Cash flows from investing activities (49 276) (396 547) (454 349)
Cash flows from financing activities (152 599) 281 704 240 217
Net increase/(decrease) in cash for the period 97 742 221 541 (24 806)
Effect of exchange rate changes on cash
and cash equivalents 35 635 11 373 39 523
Cash at beginning of the period 836 233 821 516 821 516
Cash and cash equivalents at the end of the period 969 610 1 054 430 836 233
SEGMENT INFORMATION
Roads,
Pipelines Reconcil-
& Mining ing
R'000 Structures Building Services MEP segments Total
31 August 2013
Contract revenue 1 408 301 1 617 938 1 156 580 649 444 4 832 263
Intersegment contract
revenues 18 889 24 720 166 267 8 480 218 356
Reportable segment
profit/(loss) 51 961 (31 168) 64 645 (11 689) (6 603) 67 146
Reportable segment assets 1 539 911 1 808 513 1 421 546 567 435 1 233 780 6 571 185
28 February 2013 restated
Contract revenue 2 737 738 3 232 565 2 301 647 709 953 8 981 903
Intersegment contract
revenues 41 708 1 239 43 734 58 134 144 815
Reportable segment
profit/(loss) 112 608 (22 948) 128 770 (34 624) (345 867) (162 061)
Reportable segment assets 1 542 513 1 525 285 1 276 940 478 277 1 262 838 6 085 853
31 August 2012 restated
Contract revenue 1 473 070 1 736 876 1 104 277 449 241 4 763 464
Intersegment contract
revenues 19 774 9 107 30 064 58 945
Reportable segment
profit/(loss) 55 144 (16 900) 52 777 (25 062) (14 870) 51 089
Reportable segment assets 1 753 393 1 690 185 1 204 625 476 228 1 309 996 6 434 427
STATEMENT OF CHANGES IN EQUITY
Share Share- Foreign Revalua- Ordinary
capital based currency tion share-
and payments translation surplus Retained holders'
R'000 premium reserve reserve reserve earnings interest
Balance at 1 March 2012 restated 1 019 843 44 332 (9 707) 27 649 1 031 579 2 113 696
Treasury shares disposed 9 046 (405) 8 641
Realisation of share-based payment reserve (11 213) 11 213
Total comprehensive income 21 644 51 089 72 733
Profit for the period 51 089 51 089
Exchange differences on translation of foreign operations 21 644 21 644
Dividends paid (20 998) (20 998)
Balance at 31 August 2012 restated 1 028 889 33 119 11 937 27 649 1 072 478 2 174 072
Treasury shares disposed 20 20
Realisation of share-based payment reserve (7) 7
Total comprehensive income 35 366 (213 150) (177 784)
Loss for the period (213 150) (213 150)
Exchange differences on translation of foreign operations 35 366 35 366
Balance at 28 February 2013 restated 1 028 909 33 112 47 303 27 649 859 335 1 996 308
Treasury shares disposed 900 900
Realisation of share-based payment reserve (1 101) 1 101
Realisation of revaluation reserve (50) 50
Tax on realisation of revaluation reserve 9 (9)
Total comprehensive income 90 942 67 146 158 088
Profit for the period 67 146 67 146
Exchange differences on translation of foreign operations 90 942 90 942
Balance at 31 August 2013 unaudited 1 029 809 32 011 138 245 27 608 927 623 2 155 296
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated results for the period ended 31 August 2013 (results and/or the
period) have been prepared in accordance with and containing information required by International
Accounting Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Board, and in compliance with the Listings Requirements of the JSE
Limited. The accounting policies as well as the methods of computation used in the preparation of the
results for the period ended 31 August 2013 are in terms of the International Financial Reporting Standards
(IFRS) and are consistent with those applied in the audited annual financial statements for the year ended
28 February 2013, except for the standards and amendments to standards that became effective on
1 January 2013: IFRS 10: Consolidated Financial Statements, IFRS 11: Joint Arrangements, IFRS 12:
Disclosure of Interests in Other Entities, IFRS 13: Fair Value Measurement, IAS 19: Employee Benefits,
IAS 27: Separate Financial Statements, IAS 28: Investments in Associates and Joint Ventures. The results
are presented in Rand, which is Stefanutti Stocks' presentation currency.
The adoption of IFRS 11 requires restatement of the comparative information, as two entities in the
Middle East which were previously proportionately consolidated are now equity accounted in terms of
the Standard. The loss from the joint ventures for the period amounted to R0,8 million (Aug 2012: profit
of R1,2 million, Feb 2013: profit of R14,4 million). On 1 March 2012 an investment in joint ventures of
R126 million was recognised reflecting the net asset value of the reclassified joint arrangements and
cash of R69 million was derecognised. The movement in the investment in joint ventures due to this
reclassification is mainly as a result of profits or losses and currency fluctuations.
In determining the classification of joint arrangements, management considered the following:
a) Contractual agreements with respect to sharing of control; and
b) Whether parties are jointly and severally liable for the joint arrangement's rights and obligations.
The determinants of the fair values in the statement of financial position were considered for the hierarchy
disclosure requirements in terms of IFRS 13. Investment property and business combinations are considered
to be a Level 3.
These results have been compiled under the supervision of the Chief Financial Officer, D Quinn, CA (SA),
B.Sc.Econ.
Group profile
Stefanutti Stocks, a leading construction company, operates throughout South Africa, sub-Saharan Africa
and the Middle East with multi-disciplinary expertise including concrete structures, marine construction,
piling and geotechnical services, all forms of building works including affordable housing, roads and
earthworks, bulk pipelines, mine residue disposal facilities (mainly tailings dams), open pit contract
mining, mechanical and electrical installation and construction, as well as power line transmission and
distribution construction. Stefanutti Stocks holds a Grade 9 rating from the South African Construction
Industry Development Board ensuring unlimited tender capability. The group is currently a Level 2 B-BBEE
contributor.
COMMENTARY
Overview of results
The group's results reflect an overall year-on-year improvement in most key performance areas, including
profitability and growth in the order book. A strong performance by the Roads, Pipelines & Mining Services
(RPM) and Structures business units in particular served to offset the losses incurred in the Building
business unit and Power division. Market conditions remain very competitive as a result of the depressed
global and local economic conditions. Protracted strike action in South Africa's construction sectors has
had a negative effect on the group's results.
The group's order book currently stands at R11,7 billion (Feb 2013: R8,5 billion).
Contract revenue remained stable at R4,8 billion (Aug 2012: R4,8 billion). Operating profit increased by
31% to R114 million (Aug 2012: R87 million). The operating margin increased from 1,8% to 2,4%.
The group posted an after-tax profit of R67 million (Aug 2012: R51 million).
Interest-bearing liabilities have decreased by 17% to R776 million (Feb 2013: R935 million) due to the
repayment of a portion of the loan required for the acquisition of Cycad Pipelines Proprietary Limited
(Cycad Pipelines), repayment of the first installment under the Competition Commission penalty agreement
and continuing installment sales finance repayments mainly in the RPM business unit. This has resulted in
a decrease in finance costs for the period.
Earnings per share of 38,5 cents (Aug 2012: 29,5 cents) and diluted headline earnings per share of
34,2 cents (Aug 2012: 25,1 cents) increased by 31% and 36% respectively from the comparative period.
Capital expenditure, including own infrastructure spend, for the year was R66 million (Aug 2012: R185 million),
resulting in a reduced depreciation charge.
The group generated cash of R326 million (Aug 2012: R403 million) from operations during the period.
An increase in contract receivables and work in progress contributed to a working capital outflow of
R30 million (Aug 2012: R118 million inflow). Cash flows from investing activities reduced from R397 million
to R49 million mainly as a result of reduced capital expenditure and cash required for acquisitions. Cash
on hand of R970 million (Feb 2013: R836 million) exceeded total interest-bearing debt, resulting in a nil net
gearing position being maintained.
Review of operations
Structures
Despite the competitive market conditions, this business unit produced a steady performance for the first
six months of the financial year with a slight decrease in revenue to R1,4 billion (Aug 2012: R1,5 billion),
whilst operating profit remained constant at R74 million (Aug 2012: R74 million). Profit margins increased
to 5,2% (Aug 2012: 5,0%).
Tender margins remain low due to the scarcity of infrastructure projects and limited mining and industrial
concrete work. Prospects for the South African civil engineering industry are expected to remain subdued
for at least the next twelve months. However marine and water treatment projects offer opportunities locally
and in neighbouring countries. In the medium term opportunities exist in the oil and gas sector, both locally
and in sub-Saharan Africa.
Structures' order book at the end of August 2013 was R2 billion (Feb 2013: R1,8 billion). The potential
award of several projects in the marine and water treatment industries is expected to support the order
book over the short to medium term.
Roads, Pipelines & Mining Services (RPM)
This business unit continues to produce a strong performance, and contract revenue for the RPM business
unit was up by 5% to R1,2 billion (Aug 2012: R1,1 billion), with the operating profit increasing by 23%
to R95 million (Aug 2012: R77 million).
Looking forward, the market is likely to remain competitive over the next twelve to eighteen months.
A number of new projects in the transport and contract mining sector are expected to be awarded before
financial year-end. On the back of previous successes the business unit is actively pursuing further
opportunities in sub-Saharan Africa.
The order book of RPM at the end of August 2013 was R4,8 billion (Feb 2013: R3,1 billion).
Building
The Building business unit reported contract revenue for the first six months of R1,6 billion (Aug 2012:
R1,7 billion) and an operating loss of R43 million (Aug 2012: operating loss of R29 million).
The poor performance was mainly due to continuing costs being incurred on legacy building contracts in
Mozambique and current problematic projects in South Africa. Measures have been put in place to recover
outstanding claims.
The recently established Namibian division has been awarded a hospital and hotel in Windhoek and
Swakopmund, respectively.
The group will retain its presence in the Middle East and there are signs of an upturn in the Dubai market.
However, the upturn in the construction market in Qatar is taking longer than expected.
The order book for Building at the end of August 2013 was R3,5 billion (Feb 2013: R3,1 billion).
Mechanical, Electrical & Power (MEP)
This business unit includes mechanical, electrical, instrumentation and power line transmission and
distribution operations.
Contract revenue for the half-year in the business unit was R650 million (Aug 2012: R449 million), reporting
an operating loss of R16 million (Aug 2012: operating loss of R35 million). This was as a result of loss-
making projects and holding costs in the Power division, due to delays in the rollout of anticipated projects
from the national energy provider.
MEP's order book at 31 August 2013 was R700 million (Feb 2013: R473 million). The outlook is positive
with signs of improving market conditions in the petro-chemical sector. The acquisition of Energotec's
operations has strengthened the capacity of the Electrical & Instrumentation division, which will assist in
taking advantage of good future prospects within this market. The Oil & Gas division has been successfully
established and is trading profitably.
Health and safety
The group strives to provide a safe and healthy work environment for all employees, contractors and
stakeholders with the ultimate aim of "Zero Harm". The group believes that all incidents are preventable.
During the period, the group improved its safety performance achieving a DIFR of 0,17 (Aug 2012: 0,22),
the lowest rating since the group commenced recording statistics.
Acquisitions
With effect from 1 August 2013, the group acquired plant and equipment, intangible assets and liabilities
relating to Energotec, the electrical and instrumentation business of First Strut (RF) Limited, at a cost of
R1 million. Energotec is an installer of electrical and instrumentation solutions and operates primarily within
the petro-chemical industry. This business complements the group's existing electrical and instrumentation
activities.
Energotec
Acquisition date 1 August 2013
Fair value
At acquisition values R'000
Non-current assets 3 141
Plant and equipment 3 041
Intangible assets 100
Current liabilities accruals (3 284)
Net asset value (143)
Cost of acquisition cash paid 1 000
Goodwill arising on acquisition 1 143
Acquisition-related costs
It is impractical to report any revenue, profit or loss for Energotec as only certain fixed assets, payroll
liabilities and human capital expertise were acquired and integrated into the group's existing electrical and
instrumentation operation.
The goodwill arises from the acquisition of a well-established and reputable operation with its associated
skilled workforce. This allows the group to strengthen its position in the electrical and instrumentation
market, specifically within the petro-chemical industry.
Subsequent events
No material reportable events have occurred between the reporting date and the date of this announcement.
Outlook and strategy
Whilst market conditions are expected to remain challenging, including the risk of continued labour volatility,
there are sufficient mid-sized projects to maintain the current order book.
On a positive note, trading conditions have stabilised in the majority of the group's operations. Profitability
has improved despite the current tough economic conditions. Strong cash generation from operations and
reduced capital expenditure have contributed to a sound balance sheet.
The group will continue to pursue opportunities for its full spectrum of services in sub-Saharan Africa.
Whilst the focus will be on existing operations, new ventures and markets will be considered on the back
of existing client relationships.
Stefanutti Stocks is well placed to manage the current economic and market challenges. The business is
positioned to optimise opportunities when economic conditions improve and large capital projects come
to market.
Dividend declaration
Notice is hereby given that no interim dividend will be declared.
Appreciation
We would like to extend our appreciation to the board, management and staff for their continuous
commitment and dedication. We would also like to express our gratitude to all our customers, suppliers,
service providers and shareholders for their ongoing support.
The board wishes to acknowledge the contribution of Messrs H Mashaba and M Mkwanazi, both of whom
resigned during the period. At the same time the board welcomes the appointments of Mrs T Eboka and
Mr V Cuba.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Chairman Chief Executive Officer
18 November 2013
Directors:
Non-executive directors:
B Stefanutti (Chairman); NJM Canca#; KR Eborall#
HSP Mashaba# (resigned 2 August 2013); ZJ Matlala#
ME Mkwanazi# (resigned 5 September 2013)
T Eboka# (appointed 17 May 2013)
V Cuba# (appointed 2 August 2013)
LB Sithole; JWLM Fizelle (alternate to LB Sithole)
Executive directors:
W Meyburgh (Chief Executive Officer); DG Quinn (Chief Financial Officer); SJ Ackerman
# Independent
Irish
Registered office:
Protec Park, corner Zuurfontein Avenue and Oranjerivier Drive, Kempton Park, 1619
(PO Box 12394, Aston Manor, 1630)
Corporate advisor and sponsor:
Bridge Capital Advisors Proprietary Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Transfer secretaries:
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Auditors:
Mazars, Mazars House, 5 St Davids Place, Parktown, 2193
(PO Box 6697, Johannesburg, 2000)
Company secretary:
W Somerville
20 Lurgan Road
Parkview, 2193
www.stefanuttistocks.com
Date: 21/11/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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